3 ms·

That's not how deposit insurance works. The FDIC has a $125B fund (the BIF) that banks pay into, to insure against a default. If that's somehow not enough, the

That's not how deposit insurance works. The FDIC has a $125B fund (the BIF) that banks pay into, to insure against a default. If that's somehow not enough, the FDIC does have a $100B credit facility with the Fed. However, in the event of an actual, real-wold bank collapse, the Office of Thrift Supervision (OTS) will take ownership of the bank and sell the book to someone else. That's how WaMu's collapse in 2008 was mitigated (WaMu -> OTS -> JPMorgan Chase) without ever drawing on the BIF let alone the credit facility at the Fed. Remember, the fractional reserve is where the supply of currency in the economy comes from so this is a pretty big misunderstanding of modern monetary policy. Dollars are backed by the obligation to repay the fractional reserve loans that created the dollars in the first place, and the entire social system on which it is built.

matheusmoreira 4y ago
https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008 https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008 > As part of national fiscal policy response to the Great Recession, governments and central banks, including the Federal Reserve, the European Central Bank and the Bank of England, provided then-unprecedented trillions of dollars in bailouts and stimulus, including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid a further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral, and provide banks with enough funds to allow customers to make withdrawals. > The Federal Reserve created then-significant amounts of new currency as a method to combat the liquidity trap.
- arcticbull 4y ago
  Your article and body is completely unrelated to deposit insurance, which is the case you were trying to make. As for the bailouts you were alluding to, they were managed at least in the US by the treasury, not the fed, and they were loans, not grants - that have since been repaid yielding $100B in profit, with more to come. Fiscal policy and monetary policy are different things managed by different entities. Any new money that was created to support the stimulus was unrelated (after all the treasury could have apportioned any money) and has since blinked out of existence as the loans have been repaid.

matheusmoreira 4y ago

https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008 https://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008 > As part of national fiscal policy response to the Great Recession, governments and central banks, including the Federal Reserve, the European Central Bank and the Bank of England, provided then-unprecedented trillions of dollars in bailouts and stimulus, including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid a further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral, and provide banks with enough funds to allow customers to make withdrawals. > The Federal Reserve created then-significant amounts of new currency as a method to combat the liquidity trap.

arcticbull 4y ago
Your article and body is completely unrelated to deposit insurance, which is the case you were trying to make. As for the bailouts you were alluding to, they were managed at least in the US by the treasury, not the fed, and they were loans, not grants - that have since been repaid yielding $100B in profit, with more to come. Fiscal policy and monetary policy are different things managed by different entities. Any new money that was created to support the stimulus was unrelated (after all the treasury could have apportioned any money) and has since blinked out of existence as the loans have been repaid.